EUR/USD: Continued rally unlikely; options indicate

EUR/USD's put options draw stronger demand than calls.
Investors position for a pullback as Germany announces hard lockdown.

Omkar Godbole FXStreet Contributor

EUR/USD's options market has flipped bearish, suggesting low odds of a continued rally in the short-term.

The one-month risk reversal, which measures the spread between the premium for calls and puts, has dropped to -0.175 – the lowest level since Nov. 2 – having peaked at 0.35 on Dec. 3, according to data source Reuters.

In other words, the EUR puts or bearish bets are now drawing higher demand (premium) than the calls. Investors seem to be taking hedges against potential decline ahead of the year's end.

EUR/USD is currently trading largely unchanged on the day at 1.2133. The currency pair looks to be consolidating in a 1.2060-1.2175 range after breaking out of its $1.16-$1.20 four-month trading band, as noted by Marc Chandler, Chief Market Strategist at Bannockburn Global Forex, in his latest blog post.

Macro factors such as coronavirus vaccine optimism, expectations for a global economic recovery in 2021, the fading influence of trade protectionism, economic nationalism, and the European Union's recent agreement on the 2021 budget favor further gains in the EUR. The dollar side of the story looks weak as well, as noted by Morgan Stanley.

However, Germany's decision to impose a hard lockdown during the Christmas holidays and potential weak PMIs could play spoilsport in the short-term. The Eurozone, German PMI numbers are scheduled for release this week.

Technical levels

EUR/USD

Overview
Today last price	1.2133
Today Daily Change	0.0016
Today Daily Change %	0.13
Today daily open	1.2117

Trends
Daily SMA20	1.1988
Daily SMA50	1.1859
Daily SMA100	1.183
Daily SMA200	1.1457

Levels
Previous Daily High	1.2163
Previous Daily Low	1.2105
Previous Weekly High	1.2166
Previous Weekly Low	1.2059
Previous Monthly High	1.2003
Previous Monthly Low	1.1603
Daily Fibonacci 38.2%	1.2127
Daily Fibonacci 61.8%	1.2141
Daily Pivot Point S1	1.2094
Daily Pivot Point S2	1.2071
Daily Pivot Point S3	1.2036
Daily Pivot Point R1	1.2152
Daily Pivot Point R2	1.2186
Daily Pivot Point R3	1.221

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

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